Case 3

Introduction Summary
The GST Group, known collectively as the Gurmukh Singh Technology Group since
January 2022, is an Indian manufacturing group based in Ludhiana, Punjab. The
group was created by Ranjodh Singh, who is the managing director of two of its
companies: Gurmukh Singh (GS) Engitech Private Ltd. and GS Radiators Ltd.. This
new identity was established to foster togetherness among employees and cultivate
a contemporary market image. The group manufactures high-precision machined
parts and sheet-metal components for various sectors, including agriculture,
horticulture, forestry, automotive, hydraulics, construction, heavy equipment, and
lawn-care equipment industries. They service other businesses through business-to-
business (B2B) relationships. The G.S. initials originate from the group's founder, the
late Baba Gurmukh Singh, who began manufacturing auto parts in 1938. The
company GS Auto became a pioneer and leading player in chassis-suspension
components in North India, with the GS brand recognized as a symbol of quality. The
group diversified into the heat exchanger business with GS Radiators Ltd. in 1992
and GS Engitech Private Ltd. in 2008 to enter sheet metal, combine harvester parts,
and CNC components. GS Engitech emerged as the flagship company, transforming
the group into a diversified player across many industries. The group's
manufacturing facilities, state-of-the-art infrastructure, and modern machines are
located at the GS Estate near Ludhiana. They maintain a proficient team of
engineers, designers, and technocrats with in-depth industry knowledge.
Problem Statement
The GST Group faced significant business challenges leading up to the restructuring
in early 2022. The group's revenue had dipped substantially even before the
pandemic and associated lockdowns. In 2018, working capital was squeezed
due to the non-receipt of payments from some international customers,
which slowed production and sales. These slowdowns were exacerbated during
2020 and 2021 due to the pandemic. Business with domestic customers
spiralled as a result. Ranjodh felt it was necessary to reconsider all available
options and devise a new strategy. Until recently, the marketing department
employed a simplistic pitch focused on offering the right product at the right price,
which had been successful previously but seemed inadequate as the "rules of the
game had changed". Ranjodh felt the marketing team needed to delve deeper into
the unique requirements of each customer, identify unique value elements,
and design pitches accordingly. A major restructuring occurred where the
production of automotive radiators, previously dominant products, was phased
out because large manufacturers adopted new aluminum-based technology that
made it unfeasible for smaller manufacturers like GST Group to compete. This shift
required re-evaluating the product portfolio. Following these challenges and the
restructuring, Ranjodh and his team felt the B2B marketing strategy needed to
be reframed to revive the group's fortunes and overcome the recent
difficulties.
Industry Analysis (SWOT)
Based on the sources, here is a SWOT analysis for the GST Group:
 Strengths:
o Strong historical brand reputation for quality, symbolized by the GS
brand.
o Proficient team of engineers, designers, and technocrats with in-depth
industry knowledge.
o Modern manufacturing facilities with state-of-the-art infrastructure and
machines based on cutting-edge technology.
o Ability to manufacture most products in-house, providing high control
over production schedules, quality assurance, and delivery timelines.
o Deployment of world-class CNC machines from reputable companies
for precision operations.
o Utilizes latest software like CAD, CAM, CAE, and three-dimension axis
machining facilities for high precision.
o Adherence to advanced product quality planning norms and statistical
process control techniques.
o Implementation of total quality management (TQM) practices and strict
methods for quality assurance, leading to ISO 9002:2008 certification.
o Focus on delivering "quality first-time-right (FTR)" products.

o Ability to customize offerings (products, designs, delivery, services like

credit, installation, warranty) exactly to specific customer
requirements.
o Production processes carried out in small batches, leading to a high
level of accuracy.
o New identity (GST Group) intended to create togetherness among
employees and a contemporary image.
o Significant investments made in an ultra-modern new plant for radiator
accessories, including press shop, assembly, and testing facilities.
o Commitment to corporate social responsibility shown through
manufacturing furnaces for COVID-19 victims' cremation.
o The physical plant includes distinct areas for R&D, design, quality
control, and various machining and finishing operations.
 Weaknesses:
o Previous reliance on a simplistic marketing pitch (right product, right
price) which was no longer effective.
 o Revenue dip substantially before and accentuated by the pandemic.

o Working capital squeezed due to non-receipt of payments from some

international customers in 2018.
o Business with domestic customers spiralled during the pandemic.

o Phased out production of dominant products (radiators) due to inability

to compete with larger players adopting new technology.
o Required reduction in employee numbers during restructuring (from
~450 to ~225).
o International customers, who constitute a significant portion of revenue
(~90% in FY21-22), are more discerning and demanding regarding
purchase processes and value elements.
 Opportunities:
o Promising growth prospects in the precision parts industry attributed to
rising demand for superior quality products and growth in end-product
industries.
o Growing worldwide metalworking industry driving market growth.

o Potential for integrating products with technologies like artificial

intelligence and the Internet of Things (IoT) to enhance features.
o India's convincing pitch as a manufacturing hub in the post-COVID-19
world.
o Manufacturing in Europe and the US is often too expensive due to high
labor costs.
o China is less preferred for manufacturing after pandemic-related
accusations.
o Demand for high-quality products exists, even in limited quantities,
despite fears of a recession.
o Targeting specific customer segments based on purchasing orientation
could lead to increased top line and bottom line.
o Focusing on the Procurement segment could add to exports business,
which is already over 90% of revenue.
o Targeting the Supply Management segment is expected to increase
profitability the most and lead to a considerable increase in the top
line.
 Threats:
 o Disruption in supply chain activities and government-imposed
restrictions during the COVID-19 pandemic adversely affected market
growth.
o Competitors or customers potentially renting machine tools during the
pandemic to reduce operating costs, potentially impacting demand for
owned equipment/parts.
o Competition from larger manufacturers using advanced technology
(like aluminum radiators) that smaller players cannot match.
o Fears of a recession are widespread, potentially impacting demand,
although demand for high quality may persist.
o Ensuring timely payment from customers, particularly international
ones, remains a challenge based on past experience.
Alternate Solutions
To address the challenges and reframe the B2B marketing strategy, the GST Group
considered several potential actions:
1. Deeply Understanding Individual Customer Requirements: Instead of a
simplistic pitch, the marketing department needed to delve deeper into
unique and specific customer needs, identify unique value elements relevant
to each, and design pitches accordingly. "Customerization" meant
understanding the specific needs of each customer, which requires significant
effort.
2. Strengthening Supplier Relationships: The proposed strategy included
working more closely with suppliers. This involved asking customers to train
GST Group's suppliers to ensure a clear understanding of customer
requirements.
3. Improving Cash Flow with Suppliers: Seek a percentage of payments
from customers in advance to make advance payments to suppliers,
encouraging them to commit resources, time, and attention to improving
product quality and meeting delivery schedules.
4. Defining and Communicating Value Elements: Identify specific benefits
that are valuable in the eyes of customers and communicate these. Examples
include JIT delivery (reducing inventory costs), reliability, credit terms, on-site
service, installation, and maintenance support.
5. Crafting a Strong Value Proposition: The core team proposed that the
value proposition should center on the unmatchable quality deliverable
through state-of-the-art technology and processes. This quality message
could be a uniform and credible pitch, especially for international customers.
The tagline "technology driven" was promoted to reinforce this positioning.
 6. Demonstrating Monetary Value to Customers: Customers need to be
convinced that the monetary value provided by the products (increased sales
revenue or cost savings) is greater than the price paid. The marketing team
needed to prepare pitches demonstrating this incentive clearly.
7. Customer Segmentation Based on Purchasing Orientation: As a
starting point for tailoring marketing pitches, GST Group decided to segment
customers based on their purchasing orientations. The three identified
segments are:
o Buying Orientation: These customers focus on getting the lowest
price and often treat the offering as a commodity. Targeting this
segment might increase the top line but is doubted to improve the
bottom line.
o Procurement Orientation: These customers focus on lowering the
total cost of purchase transactions, including purchase cost,
search costs, transaction costs, information costs, inventory costs, and
usage/disposal costs. They are expected to buy quality products.
Targeting this segment is seen as good for increasing the top line and
improving the bottom line.
o Supply Management Orientation: These customers aim to
maximize the value of benefits received at the buying price. They
demand high quality, service, reliable delivery, commitment, and
consistency. They value specific value elements and are expected to
pay for them. Targeting this segment is believed to increase
profitability the most and lead to a considerable increase in the top
line.
8. Evaluating Attractiveness and Implications of Each Segment: Ranjodh
was evaluating which segment(s) to focus on, considering the impact on the
top line and bottom line (as shown in Exhibit 4).
Suggested Solution
Based on Ranjodh's objectives and the analysis of the customer segments, the
sources suggest a path focused on segments that align with the company's
strengths in quality and technology and offer the best potential for achieving
financial goals.
The Supply Management segment appears to be the most attractive target for
the GST Group. These customers value high quality, service, and specific value
elements for which they are willing to pay. Targeting this segment is projected to
yield the highest percentage increase in both the top line (35%) and bottom line
(50%) according to Exhibit 4. This aligns directly with the group's target of doubling
revenues and increasing profitability by 50% over the next five years.
While the Procurement segment also values quality and focuses on reducing total
costs, the potential financial impact (10% top line increase, 20% bottom line
increase) is less significant than the Supply Management segment for achieving the
aggressive growth targets. However, this segment buys quality products and is
good for increasing both top and bottom lines. Given the potential for high growth
and profitability in the Supply Management segment, this should likely be the
dominant segment in the customer mix.
The Buying segment, focused solely on the lowest price, is less attractive.
Targeting this segment might increase volume (top line 15%) but is expected to
have a minimal impact on the bottom line (10%) and does not leverage the
company's strengths in quality and technology.
Therefore, a suggested solution would be to prioritize and focus marketing
efforts primarily on the Supply Management segment, leveraging the
company's strengths in unmatchable quality, state-of-the-art technology,
precision manufacturing, customization capabilities, and reliable delivery. The
marketing pitch should clearly articulate and, if possible, monetize the specific
value elements relevant to these customers.
To achieve the goal of doubling revenue and increasing profitability by 50%, the GST
Group should actively pursue customers in the Supply Management segment,
demonstrating how their products provide significant value beyond price, leading to
increased sales revenue or cost savings for the customer. This focus on value,
quality, and service for the most discerning customers would also help build a
sustainable competitive advantage. Concurrently, maintaining business with the
Procurement segment could provide a steady contribution to both the top and
bottom lines. The group should continue its efforts to work closely with suppliers
and manage working capital effectively through advance payments. Ranjodh's
personal involvement in meeting customers and reassuring them of reliability is also
crucial.